DISH Network Q3 2021 Earnings Call Transcript

AlphaStreet
Provided by AlphaStreet
November 4, 2021
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Operator

Good day, everyone, and welcome to the DISH Network Corporation Q3 2021 Earnings Call.

At this time, I'd like to turn the call over to Mr. Brandon Ehrhart. Please go ahead, sir.

Brandon Ehrhart
Senior Vice President and General Counsel, Wireless; Corporate Secretary at DISH Network

Thanks, Alan. Good morning, everyone. Thanks for joining us. We're joined on the call today by Charlie Ergen, our Chairman; Erik Carlson, our Chief Executive Officer; Brian Neylon, our Executive Vice President and Group President, Pay-TV; Michael Schwimmer, our Executive Vice President and Group President, Sling TV; and Paul Orban, our Chief Financial Officer.

And on the Wireless side, we've got Stephen Bye, our Chief Commercial Officer; Dave Mayo, our Executive Vice President of Network Deployment; and John Swieringa, our Executive Vice President and Group President, Retail Wireless and the DISH Chief Operating Officer. We're not going to be making any opening remarks today, but we will start with the same safe harbor.

Statements that we make during this call that are not statements of historical fact constitute forward-looking statements that are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results and/or from our forecast. We assume no responsibility for updating forward-looking statements.

For more information, please refer to the risks, uncertainties and other factors discussed in our SEC filings. Also as part of the process for FCC Auction 110, we filed an application to participate as a bidder for those spectrum licenses. Because of the FCC's anti-collusion rules, we're not able to discuss that option, and we will not be taking questions on that during today's call.

That's it. And with that, Alan, let's open it up to questions, and let's start with the analysts first.

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Operator

[Operator Instructions] We'll take our first analyst question from David Barden with Bank of America. Please go ahead.

David Barden
Analyst at Bank of America

Hey guys, Thank you so much for taking my question really appreciated. So I guess the obvious questions are, number one, how is Vegas coming along? When are we expecting the launch? How are the pieces of the network working together? And what's the game plan when we do get to market? And I guess the second question would be, I just noticed in your filing today, the work in progress capex is now about $820 million. That's up $400 million sequentially for about a $1.6 billion annualized run rate, up from about $250 million of capex year-to-date in the wireless business. Could you kind of elaborate a little bit on where that's going? Is that run rate going to persist? And anything you can tell us about what's happening in wireless would be great. Thank you.

Dave Mayo
Executive Vice President and Network Development at DISH Network

So thanks for the question, David. So I think -- well I'll start off talking about Vegas a little bit. We're actually in a beta test mode. We've got friendly users, working fantastic -- helping us test the network. We were a little delayed as a consequence of frankly, the Vegas network was -- I think about it as a preproduction environment or a development environment until fairly recently. Just getting in the -- and a little more color is just getting the radio software and the core network software to work well together and be reliable. We're still working through T-Mobile roaming and specifically handover issues. So Vegas is, I'd say, coming along, we're in the beta test mode and we'll progress that over the course of the next 90 days and look forward to launching Vegas sometime in the first quarter of 2022. As it relates more broadly to the development process, we're making great strides and great progress around the leasing and permitting activities associated with the 70% milestone for 2023. And as it relates to the 20% threshold or POP requirement for 2022, as you probably saw, we've -- in the Q, we started 35 markets when we filed or when we -- at the end of the quarter, we're now up to 42 markets that have construction activity. And as it relates to the sites that are required to meet the '22 obligation, we have building permits on 2/3 of them, which I feel really good about that. We're months away from the deadline and we've got building permits on 2/3, we started construction on well over 30% of the sites required for 2022. The build's very focused. I mean we're really just building in markets that we plan to launch in 2022, and we'll start the build activity on markets for 2023 in the new year.

Charlie Ergen
Co-founder and Chairman at DISH Network

The dollars.

Dave Mayo
Executive Vice President and Network Development at DISH Network

Yes. And from a dollars perspective, you're right, the capex has ramped up. And as you would expect, it's going to continue to ramp over the course of the first quarter and probably reach kind of a steady state until we finish the 70% in 2023 over the course of the four quarters of 2022. So Q1 will ramp up some more and then we'll flatten out just because from a build perspective, we've tried to level below to the fullest extent we can, only because it's really hard to build. We don't want the sawtooth effect because it's difficult for the GCs. It's just difficult to manage. So we're on a ramp. I'll give you some color, we had, last week, almost 300 construction starts, and that number will continue to grow as we move into the first quarter, and then we'll stabilize that midway through the first quarter and then we'll run throughout the balance of 2022 -- or 2022 at that level.

David Barden
Analyst at Bank of America

Perfect. If I could just ask one follow-up. The big debate has been, Charlie, maybe how you want to come to market? Does DISH want to be the last to market consumer smartphone broadband player? Or does it want to be a first-to-market wholesale provider or enterprise service provider? Any color you could share about how you're thinking there would be great.

Charlie Ergen
Co-founder and Chairman at DISH Network

Yes. No, I think we're going to do both. I mean, so on the -- as a fourth player, we're not going to dominate the retail handset business. And I know a lot of analysts kind of look at us as this retail handset, but we'll get our fair share of that business. And that will be a very profitable business for us. But obviously, the network and the amount of spectrum that we have from a wholesale perspective, we're willing to wholesale some of that spectrum. And particularly on the enterprise side, where that's kind of a jump ball. In other words, I think all the carriers are going to do well in enterprise. It's a new market segment. It's a market segment that can rival the kind of demand you see for consumers, because on the enterprise side, when they can have their own private networks, so to speak, a slice of the network, they can -- they're going to be able to build their products safer, cheaper, better and gain on the competition. So it's going to be a big market. We're well positioned for that because our opinion is that you need to be cloud-based and you need to be automated to do it, to slice your network. So we're going to have an advantage there. But the incumbents have an advantage of incumbency and brand recognition and that kind of stuff. So I think everybody is going to do pretty well. But I feel like that's a place where we can get more market share than we will in the handset business. Stephen, do you want to add any -- Stephen runs that side of the forest.

Stephen Bye
Executive Vice President and Chief Commercial Officer at DISH Network

I think, Charlie, you characterized it very well. And I think what's interesting in sort of the enterprise space is sort of the move to sort of industrial forward area. And sort of the opportunity that, that presents for enterprise customers to build a more efficient operating model. And so with our platform, we do have some capabilities in that environment with the cloud-native architecture that we're deploying that gives us the opportunity to differentiate more and actually provides more degrees of freedom for an enterprise customer as well than what you would have with a traditional network. So we do think we have some inherent advantages there, but it's certainly going to be a good business for everybody.

David Barden
Analyst at Bank of America

Thank you guys so much.

Operator

Next question will be from Jonathan Chaplin with New Street Research.

Jonathan Chaplin
Analyst at New Street Research

Thanks guys. Two quick ones. I'm wondering if just as a housekeeping matter, you can give us an idea of how many subs you still got left on the TV -- mobile network. And if you had your choice, how much time you would need in order to switch those over? And then more interestingly, I'm wondering if you can give us a sense, Charlie, of how the market splits or maybe this is a question for Stephen, between you -- the enterprise market split between you and the cloud service providers? You're obviously going to market with the likes of Amazon, AWS as partners, how does the enterprises spend on communication services get split between you and them in those kind of deals?

Charlie Ergen
Co-founder and Chairman at DISH Network

I'll just start. I'll take the first part of that CDMA and stuff and Stephen, maybe, take the business side of the question. The CDMA shutoff, obviously, we have -- since it's now extended to March 31, we'll still have well over remaining customers on the CDMA network. And if T-Mobile has their way, those customers will lose service on April -- on March 31. And in fact, they won't even -- based on T-Mobile's testimony in California, they won't even be -- many won't be able to make 911 calls. So we look at it a little bit different to T-Mobile. We look at it for consumer first and say why in the world do you want to disenfranchise the customers? We realize we're a for-profit company. We realized that T-Mobile is a for-profit company. But we play the long game, and we want to make sure that we're taking care of consumers. And there's not -- despite our best efforts and aggressive efforts, we know that we're not going to -- that too many people will be disenfranchised. And these are more economically-challenged customers for the most part, which is why we're not able to convert them. And it just seems like the wrong thing to do. And I get that -- and despite -- and there's other headwinds such as supply chain and having enough units to do it. I would have preferred to work with T-Mobile, and we're there for them. They want to work with us and work together so that we can make sure we have enough units for customers, and we -- a better ways to work together to convert the customers. We want -- we would love to see -- we're not against the CDMA shutdown. We believe technology needs to advance, but you have to do it, you can't do in the back of customers. And so that's something they'll have to live with their whole life. They're going to have to live with the fact that they're anti-consumer, to the extent of profits and that's something that they're going to live with, and we've taken the other approach. And we spent a lot of money, some headwinds in this quarter that you see. We spent a lot of money to upgrade people for the false deadline of January one, and now we've got maybe another false deadline there. So we'll continue to go as fast as we can. But it's disappointing. I'm disappointed in T-Mobile and I wish they had taken a little bit longer-term approach to it, maybe a little bit higher end consumer approach to it. But we're here to work with them to make sure the consumers aren't disenfranchised. With that, I'll turn it over to Stephen.

Stephen Bye
Executive Vice President and Chief Commercial Officer at DISH Network

Yes. So just on the question as it re Lates to AWS, we do have a very good partnership with AWS. It's obviously very strategic, and we are working with them on enterprise opportunities. I won't comment sort of how the split works in terms of how we do that. Each deal is generally a custom deal, as you would expect, depending on the enterprise requirements. The other point to probably highlight is the arrangement with AWS is nonexclusive. So we do have customers that have different requirements with -- and different partnerships with other cloud providers as well. And so we'll work with them and complement that solution. We also work with multiple systems integrators and we partner on different opportunities across different verticals based on kind of the solution that those customers are looking for. And I guess my earlier comment about the degrees of freedom we have and the platform that we have allows us to be able to integrate that in different ways depending on what the customer requirement is. So -- and just as an example, in some opportunities we are partnering with our sister company, EchoStar and Hughes on certain opportunities that they're in segments that are complement of what we're doing on the terrestrial side as well. So it's a good partnership with AWS. They're a very important partner, both in our network build as well as in the enterprise opportunities that we're exploring, but we are also working with many other SIs as we pursue this market opportunity as well.

Charlie Ergen
Co-founder and Chairman at DISH Network

Yes. This is Charlie. Let me jump in. When you look at it from a big picture perspective, and this is -- it's hard to model now because we're certainly in the infancy of this. But we do -- the way we look at it from a network perspective, where do we get the highest profitability per bit, right? And we don't -- for the enterprise customers, you don't have some of the customer service to consumers, you don't have the retail stores, you have a lot of cost you bring out of that. And because those bits are so valuable in terms of them being able to make their products better, we think that the enterprise business has more profitability, probably, that's our guess. That has a lot more profitability than kind of a very competitive retail wireless business, where everybody is selling the same thing. We're the best 5G, we're the fastest 5G. We can differentiate a lot more on the enterprise business, where we can say we're in the cloud -- I don't think the business survives the next decade. If you don't -- if you're not -- if you don't have automation, then you don't have -- you're not using the artificial intelligence and you're not cloud-based. I just don't think you should. But rare exception, some old school industries maybe do, but you're just not going to survive. And we're on the leading edge of that. And so we think that we move people there in a way that -- or help move them there in a way with our partners, in a way that they couldn't otherwise get there with the other carriers.

Jonathan Chaplin
Analyst at New Street Research

Got it, Thanks guys.

Operator

Next question will come from Walter Piecyk with LightShed.

Walter Piecyk
Analyst at LightShed

Thanks guys, Charlie, can you tell us what exactly does consumer beta service mean? Like what does that look like? And I think related to that, Dave, in his comments, talked about working through some issues with T-Mobile roaming. Are you hooked up with AT&T yet in terms of roaming or using their network? I was in Vegas last week. I didn't really see much of anything there, but in the stadium T-Mobile didn't even work. So I'm just curious where you are with AT&T.

Charlie Ergen
Co-founder and Chairman at DISH Network

We don't have roaming with AT&T yet and T-Mobile is first up for us. They're -- they remain a very important partner for us and the roaming commitments that they've made are -- we can't launch commercial service without T-Mobile on. So if you can't -- I don't think you have a commercial service if you drive out some in Las Vegas, you don't have any service. So we have to get that done. And we're working through those issues. But it's not a secret that our relationship is not the greatest. So that's difficult, but they've made commitments to...

Walter Piecyk
Analyst at LightShed

So why not prioritize AT&T and just use them instead?

Charlie Ergen
Co-founder and Chairman at DISH Network

They've made to the regulators and we'll get through that with them, and make sure we can get it. And then what AT&T will come later. And then in terms of what our beta test today, it looks like our employees, some people who've signed up on our system are signed up to be a beta tester and then required to give us information. And then every day, we go through all the tickets of the stuff that doesn't work, and there's stuff that doesn't work, and then we go fix that, and then we'll continue to add more and more people, more and more system as we get it more stable. So -- but it's -- but Walter, if you come to Vegas and you want to go test it out, we'll be able to do that for you. The next kind of big thing for us is in November when AWS has their re:Invent conference, it's around the first of December or something like that. And I think people will probably try to get the experience a part of our network then.

Walter Piecyk
Analyst at LightShed

Okay. Maybe I'll come after that. So on the second topic, there's been some breaking news. Apparently, the FCC has backed down to the FAA and C-band is now delayed. They're claiming a month, but obviously, we've seen with Ligado that these things can drag on much longer than that. You have -- you're building in a couple of markets, but you have this depth of spectrum that is leasable to AT&T and/or Verizon. Is that something that you would consider? Or are you just going to hold all that spectrum back? And because it's going to take you a while, I think, to build that, who knows maybe this one month delay becomes nine months and you can make some money in nine months by leasing the spectrum. So is that an option that you'd consider?

Charlie Ergen
Co-founder and Chairman at DISH Network

The answer is yes. We have been very public, they were wholesale. And so we know it's publicly our leasing capacity to T-Mobile today. And we do think there are other interested parties in leasing capacity. And so I'm looking at Dave here because Dave has a situation as he looked at his build out where does he have pockets? But I think that that's a -- that's certainly something that we would consider. And there are a number of parties that have asked about the ability to lease capacity for -- in the short term. And obviously, I haven't seen the news on C-band, but obviously, that would -- if any delay in C-band, particularly for Verizon, probably, where they really spend a lot of money on it, would not be -- would be positive for T-Mobile, probably, but not positive for the other guys.

Rich Greenfield
Analyst at LightShed

Charlie, it's Rich Greenfield. I just wanted to jump in. You're always so thoughtful on sort of the big picture of the video industry. And I know you're sort of now -- you're sort of in a blackout situation with TEGNA. The Sinclair RSNs are obviously still dark, Major League Baseball and the NBA are sort of talking about doing their own over-the-top RSN service -- or sorry, streaming local sports service. And every media company I've just listened to over the last week, all they talk about is their streaming services and not their linear networks that you pay a lot of money for. I'm just wondering sort of how you think about like are we getting closer to the point where rates or channels actually start coming down? Like are -- do you think anyone is learning that they can't charge more every year as viewership goes down and they don't even care about the assets versus their streaming services? And how does that affect how you negotiate weak trends, programming, etc.?

Charlie Ergen
Co-founder and Chairman at DISH Network

Yes. I mean, I don't think -- it doesn't really change anything. I mean it does change stuff because as something that's available through streaming, your product becomes less valuable on a linear basis because people have another way to get there. So it relates to retrans, now that the biggest -- really retrans today is an NFL season ticket, so your local teams, right? That's the value there. And absent NFL, I don't know if they have to show in the top 100 that gets there, right? So maybe the Oscars or something, I don't know. But there's not much there based on what we see. So viewership, we've seen viewership decline 15 years in a row on the networks and retrans go up by 1,000%. That's not sustainable, but we look at it for math. And we know we'll lose customers, so we know we'll lose TEGNA customers. They're not up and we are losing some customers, but not as dramatic as it might have been in the past. And once you do football season and once people find a way to get football next year, that's going to be a permanent loss of viewers for TEGNA. And of course, people also can go get it from the networks. They can get Peacock from NBC directly. And maybe TEGNA gets revenue from that, maybe they get more revenue than they do from us, and maybe that makes sense for them. But we look at it economically. Sinclair is bigger than TEGNA, and we've had a long-term relationship there. And that -- there's more conversation around that, than there is, and they're bigger and would probably have a little bit more clout and scale in the marketplace. But I said it last time, I think the moves in retrans are down, not up. And I don't know what that does to valuations, but I saw Gray publicly said 50% of their revenues are retrans. And I think that's going to come under pressure.

Rich Greenfield
Analyst at LightShed

But just to be clear, there hasn't been a default sign yet from anyone...

Charlie Ergen
Co-founder and Chairman at DISH Network

The end result of this is networks -- if you fast forward 10 -- a decade, I don't think -- I think most things will -- I don't know that networks exist, maybe for local news, because they're pricing themselves out of the market.

Rich Greenfield
Analyst at LightShed

Just to be clear, no deals have been done at a down level yet, but that's where you think it's going?

Charlie Ergen
Co-founder and Chairman at DISH Network

We don't have -- well, TEGNA is down, and there is no deal done there. So Sinclair is still up. And obviously, we've had several extensions that are public. And beyond that, we just wouldn't talk about a current negotiation that -- where the company is still -- did you want to say something, Erik?

W. Erik Carlson
President and Chief Executive Officer at DISH Network

No. I mean, Rich, I mean, you're right. I mean, retrans is still going up. Viewership is still declining. So this is -- Charlie is spot on there. I mean, generally, I mean you're looking at retrans as just being attached on the American consumer right now. What is it? Something like $12 million or something like that and viewership continues to decline. And so that obviously puts pressure on our margins, and it puts pressure on our consumers' willingness to pay. So we've got to be better at customer experience and a bunch of other things in order to combat the attacks.

Charlie Ergen
Co-founder and Chairman at DISH Network

But I don't know why you want to drive your customers to watch Netflix and Hulu, and I don't know why you want to do that, but they're doing it. So but they have their own -- I'm not in their shoes. So they have their own -- they have reverse retrans and they had their own -- I'm somewhat empathetic to their plight because they don't have a real place to go, absent some fundamental changes.

Rich Greenfield
Analyst at LightShed

Thank you very much.

Operator

Our next analyst question will come from Rick Prentiss with Raymond James.

Rick Prentiss
Analyst at Raymond James

Yes. Thanks. A couple of questions. One, on the Las Vegas consumer trial. Do you anticipate having a wholesale enterprise trial strictly to Vegas? Or do you need more footprint before you could actually do a wholesale enterprise trial?

Stephen Bye
Executive Vice President and Chief Commercial Officer at DISH Network

Yes, Rick, it's a very good question. And in fact, we do have both wholesale and enterprise lined up. We're very focused on the consumer trial right now. And at the appropriate time, we'll talk more about what we're doing there on the wholesale side. And what's actually exciting about the wholesale opportunity is a lot of pundits would suspect that you need to have a nationwide footprint to support that segment. There are a lot of opportunities there to serve customers with very niche products and capabilities that are local or even a regional level, and we're working with companies to do that. And we'll announce at a later date some further details on what we're doing there.

Rick Prentiss
Analyst at Raymond James

Makes sense. I think, Stephen, you also talked about satellite companies. We've seen OneWeb with AT&T, Project Kuiper with Verizon. You mentioned sister company, EchoStar. Maybe broadly, Charlie and Stephen, how do you see satellites fitting into, unintended, the space here for you?

Charlie Ergen
Co-founder and Chairman at DISH Network

Yes. I see satellite as part of connectivity. We're a connectivity company. We are pretty -- through our history and through our EchoStar relationship, we're fairly knowledgeable about satellite. And I think you're going to see GEOs, LEOs and MEOs play a part in the products that you can bring to market and how you can differentiate yourself, whether it be on the enterprise or a consumer basis. And I think we're well positioned in that. In a funny sort of way, video is most of your traffic, and we're pretty good at video and satellite is a part of your connectivity, and we're pretty good at that. And so I think we're able to differentiate in ways there, and you just have to stay tuned as we move through those issues and see where everything lands because a lot of it depends on where the -- I mean, ideally, there would be a standard and people would all deal the standard. It wouldn't be a sandbox, individual sandbox for everybody else. But like most things in wireless, everybody seems to want their own sandbox, and we're probably the only guys that say might make sense from a capex perspective to have a standard and play in the same sandbox, but we'll see.

Rick Prentiss
Analyst at Raymond James

One quick housekeeping question, if I could. On Pay-TV, SG&A was somewhat higher than we were expecting in the third quarter. Is there anything out of period in there? Or is this a good run rate? Or was first half of this year a better run rate? Anything unusual in Pay-TV SG&A?

Paul W. Orban
Executive Vice President and Chief Financial Officer at DISH Network

Yes. This is Paul. Yes, there's no one-timers in there this year. However, last year, though, had the benefit of COVID and everyone kind of hunkering down on costs. So going forward, though, I think it is probably a pretty good run rate to look at.

W. Erik Carlson
President and Chief Executive Officer at DISH Network

I think, Rick -- this is Erik. I'd also say, look, there's just -- generally, you're hearing about inflationary pressures, and there's some of that baked into that. We'll see what happens with that on the run rate. And then obviously, we've had -- as Charlie alluded to already on the call, just with the false January first, CDMA deadline, we've had some additional expense along with converting customers. So we'll see where that ends up over the next few quarters. But we'll keep you posted on that.

Rich Greenfield
Analyst at LightShed

Alright, Thank you.

Operator

Next question will come from Michael Rollins with Citi.

Michael Rollins
Analyst at Smith Barney Citigroup

Hi, Good morning. Two questions, if I could. First, curious with the Vegas launch and the other markets that you're deploying, are those radios capable of using the 800 megahertz spectrum that you have an option to buy from T-Mobile? And just curious what the -- what your thoughts are in terms of fully acquiring that spectrum band? And then secondly, you've shared your thoughts in the past about the possibilities of satellite video mergers. Just curious, your current thoughts how the industrial logic for that type of merger is evolving? And is there an urgency to try to get that done?

Stephen Bye
Executive Vice President and Chief Commercial Officer at DISH Network

I'll take the first question there, Michael. In terms of the radios that we are deploying, it's self-support. All our current bands and the radios from a hardware perspective and even a software perspective, have the ability to turn on the 800 megahertz. So we decided to ensure that as we did the deployment, we would not have to come back and add an additional radio in the event that we decide to exercise that option. So all the plumbing is in place, all the hardware is in place, the software is there, all we have to do is really activate those radios. And beyond that, even all the carrier aggregation combinations are already being designed in to be able to support that, depending on what we do with that option.

Charlie Ergen
Co-founder and Chairman at DISH Network

And then on -- I think you talked about the industrial logic of putting the two video companies together. Again, I've said it many times, inevitable. I think that there's been a change of control there in terms of from AT&T to TPG and the question is probably -- I don't know they're -- I assume that they see the logic there as well. But that's probably a better question for them. I think the big thing would be regulatory. And I think it's prudent for anybody to wait until we have our antitrust team -- the government has their antitrust team in place, which could happen maybe in the next month or two and see kind of how they're looking at mergers and seeing kind of what they're focused on and what they're not focused on. But obviously, industrial logic is it's not -- there's not three competitors in the video business or four competitors, there's dozens of competitors and all with large scale and the technology has changed the economic equation. And you run the -- if you want consumers to have a choice of satellite television, it will have a much longer runway and choice pattern if there's a combination than if there's not.

Michael Rollins
Analyst at Smith Barney Citigroup

Thank you.

Operator

We'll move on to our next question from John Hodulik with UBS.

John Hodulik
Analyst at UBS Group

Hey, Thanks guys. Maybe back to the wireless network build. Actually, recalling I guess, 42 markets. I mean, how many markets do you guys expect to build into to hit the -- both the '22 and the '23 mandates? And then from a sort of breadth versus depth standpoint, anything you could tell us about the build in each market? Is it just sort of identified urbaners? Or sort of how deep into the suburbs you go? I don't know if you can give us a sort of towers and nodes per market standpoint? And has that view or that balance shifted at all with the AT&T deal? Does it make your build out more efficient? Or do you change how you think about deploying infrastructure because of that roaming deal? Thanks.

Dave Mayo
Executive Vice President and Network Development at DISH Network

Yes, sure. Thanks, John, this is Dave. So I'll start off with the AT&T question. What we're doing hasn't changed a bit as a consequence of the AT&T roaming deal. And when I think about what we're building, it's really the metropolitan areas in any of the given markets. I mean, we've built -- we designed the footprint sufficiently large to minimize the handovers to other networks. So we put -- the networks were built such that the handover back to T-Mobile would be on an interstate outside of town. So that would imply that all of the key suburban areas in all of the geographies will be covered. If I think about -- your question was, can you help dimension the 20% and the 70%? And I'd say that with respect to the 70%, that encompasses all of the major metropolitan areas across the country. And if you think about cities over 0.5 million, they're going to be -- in the Continental U.S., if it's over 0.5 million POPs, it's going to be in the footprint, right? And I'd say if I roll the clock back to the 20%, it will -- similarly, it will be metropolitan areas where they're relatively easy to build. So for example, California that's intrinsically more difficult, is not high on the list in the 20% nor is the Northeast, although there are some areas in the Northeast. It's primarily the middle of the country where co-location is prevalent, and we can move very quickly. So I mean, I think that's probably what we're trying to do in the 2022 timeframe and we'll attack and address the more difficult areas in the 20 -- to meet the 2023 build objective.

Charlie Ergen
Co-founder and Chairman at DISH Network

Yes, this is Charlie. I'd just add to it, we're already building for '23, right? It just takes longer because there's more rooftops and more permitting and things like...

Dave Mayo
Executive Vice President and Network Development at DISH Network

Do a little side act on the soft cost point, yes.

Charlie Ergen
Co-founder and Chairman at DISH Network

And you think Texas and Ohio and North Carolina, and Dave knows it better, then Florida, those are the markets that -- and we'll give you more color on the markets as we got -- we have internal competition here, and we don't want to fix size yet. Nobody is getting the yellow jersey yet. And so we're seeing who kind of gets everyone, we're having a little bit of fun with that, and then we'll -- as we start seeing some of our 36 -- what do you get? 36...

Dave Mayo
Executive Vice President and Network Development at DISH Network

Yes. 36 market organizations.

Charlie Ergen
Co-founder and Chairman at DISH Network

Some of those guys are going to get the yellow jersey and then we'll be announcing

Dave Mayo
Executive Vice President and Network Development at DISH Network

But build is going really well.

Charlie Ergen
Co-founder and Chairman at DISH Network

I would say deployment is -- every day, I think we spend most of the time, the team other than Dave, deployment is going -- we're on track for the 20%. So it's really the execution of how you get all our vendors and all our software and our radios to work together because it hasn't been done before in the cloud. A little bit easier to make it work traditionally. But we don't need to build last generation's network. We got to build where things are going, and it's more difficult. So the execution risk is still there for us. But the teams and the external vendors are putting extraordinary efforts into getting there, and we're excited to finally have Vegas making calls.

Dave Mayo
Executive Vice President and Network Development at DISH Network

Ok, Thank you.

Operator

Next, we'll go to Kannan Venkat with Barclays.

Kannan Venkat
Analyst at Barclays

Thank you. Charlie, maybe on the retail side, when you think about the go-to-market strategy, it looks like you're thinking of some kind of a self-branded device, and that will obviously help you manage working capital. But is that some kind of a template we should think about as you enter the market more widely as you go into next year? And then just from a working capital perspective, as you head into next year, I mean, the current free cash flow run rate of roughly about $2 billion a year, does that change materially either because of maybe working capital step-ups or the capital intensity, as you indicated, I guess, it steps up the next couple of quarters and stabilizes? But then you also have Pay-TV costs potentially stepping up post-COVID. So how should we think about the run rate for free cash flow as we head into next year?

Charlie Ergen
Co-founder and Chairman at DISH Network

Yes, do you want to take the free cash, Paul? And then John, you take retail?

Paul W. Orban
Executive Vice President and Chief Financial Officer at DISH Network

This is Paul. I'll take free cash flow. Yes, going forward, you're going to see a drag on free cash flow as it relates to our 5G deployment, as Dave spoke about earlier, that capex number will continue to grow and that will drag down the historical free cash flow amounts that you've seen.

Charlie Ergen
Co-founder and Chairman at DISH Network

Yes, I think the way to really look at it, absent the capex expense, right, we're still in a strong free cash flow perspective, but capex will drag it down some.

John Swieringa
Executive Vice President and Group President, Retail Wireless and DISH Chief Operating Officer at DISH Network

Kannan, this is John on the handset side. We're working with all major OEMs and partners that's incumbent upon us to build out the partner ecosystem on the device side of our own network and also to secure devices that are compatible with the T-Mobile and AT&T networks. I think it's been a pretty common theme. There are supply shortages in the low- and mid-tier Android space. So we don't really have scale. So we are on allocation with some partners now, which impacted us in the quarter. When you think about going forward, we do want to take a broad approach to having the right consumer offers in the right segments. And we did launch the Celero5G this week, and we think it's going to do well for us. And we're going to focus on bringing in the right products based upon the consumer segment. That's a device will primarily be distributed through Boost at branded retail, national retail and digitally and we've been happy with it so far. And a lot of work next year as we bring in devices for our own network and certainly with Band 70 support and the like.

Kannan Venkat
Analyst at Barclays

Got it. Can I just follow up on the cash flow question? Broadly, as you go into next year, at some point, I guess, when -- before your revenue starts scaling, this potentially dips into a negative territory. And so is there any thought in terms of how to finance some of the cash burn initially as your revenues scale? And should we expect that maybe over the course of the next 12 months or so?

Charlie Ergen
Co-founder and Chairman at DISH Network

Yes. I think we always look at the marketplace opportunistically. And there's a lot of factors, but we obviously expect we're going to grow our business, particularly in the retail wireless business. And we do think that our spectrum -- we think we can monetize a little more spectrum. But yes, there could be cases where we go to market as well.

Kannan Venkat
Analyst at Barclays

Thank you so much.

Operator

Next we go to Doug Mitchelson with Credit Suisse

Doug Mitchelson
Analyst at Credit Suisse Group

Thank you so much, A few clarifications and a question. I guess the first 300 construction starts in that -- this last week and that's going to ramp. So if you end up doing sort of 5,000 a quarter or so, I thought at some point, there was a mention that maybe about 17,000 sites would get you to where you need to be. And it seems like you might be running well ahead of that. So I'll just ask one by one. Any thoughts on that?

Charlie Ergen
Co-founder and Chairman at DISH Network

Yes. I don't think we've disclosed a number of sites that we need, but we'll have -- but we have a commitment to the FCC of 15,000 sites at certain speeds by June of 2023. Now we believe the number will be higher than that, obviously. But the 20% number doesn't require that kind of scale.

Doug Mitchelson
Analyst at Credit Suisse Group

Okay. Sorry, Charlie, I thought at one point, you had told us sort of just over 15,000, but maybe just tied to that FCC commitment, how should we think about the transition to AT&T MVNO? I know it was sort of asked earlier, but is there like a percentage of 2022 traffic that we can expect that would be shifted over to AT&T rather than T-Mobile? It's just sort of interesting, I think, for everybody watching DISH, how that relationship with T-Mobile evolves.

Charlie Ergen
Co-founder and Chairman at DISH Network

Yes. I mean I think a lot depends on T-Mobile, if they're not interested in the relationship. But they view it as a shotgun marriage by the justice department, I guess. I mean, if they're not interested in the relationship that obviously that -- we see T-Mobile as being very fundamental to what we're doing, but to the extent that they're not interested in more traffic, we'll move to AT&T. So...

Doug Mitchelson
Analyst at Credit Suisse Group

Okay. And then, I think...

Charlie Ergen
Co-founder and Chairman at DISH Network

Our experience has been that the AT&T network is superior from a coverage perspective. I think that when you look at 600 megahertz in 5G, I think T-Mobile has done more in getting the 5G out but on their low-band spectrum. Having said that, you don't -- as a consumer, forget all the marketing for our consumers, and we've done the test. If you did a blind test, our customers would far -- would be a pretty big discrepancy. They would prefer the AT&T network. If you get into the marketing of it and things like that and you look at 5G and 600, I think T-Mobile has an advantage there. But that's -- for our customers, that's a bit more -- that side of the marketing is not as important. It's really coverage and dependability and now on, particularly as you get into rural America, where a lot of our customers are, on the video side. T-Mobile is still building that out.

Doug Mitchelson
Analyst at Credit Suisse Group

Got it. And then last couple, the $10 billion of capex that was reaffirmed in the 10-Q for 5G network build out, are you able to give us a sense of time frame? Is this 2023 time frame sort of cover that entire $10 billion? Or is that over an extended period of time?

Charlie Ergen
Co-founder and Chairman at DISH Network

No, that's over an extended period time. So that goes through at least 2025, where we have continual build-out requirements beyond 2023. And Dave can speak, but as you get into smaller markets, your costs are higher or POP. Obviously, it's less POP, but that's over the extended period of time through 2025. And there is some confusion out there because our commitment number went up this quarter, right? And those commitments are really opex, right? So our tower leases are over, on average, 20 years or greater. We have a commitment now to AT&T, which has been publicly disclosed, $5 billion. That's all opex. And obviously, there's revenue associated with for sure, AT&T, there's offsetting revenue materially higher than that. So that's not in our $10 billion. That's opex. But the actual capex, we're still on track to be $10 billion or better or extended through time. So nothing will be less than that in 2023.

Doug Mitchelson
Analyst at Credit Suisse Group

And last one, your comments on consumer versus wholesale are always interesting -- and versus enterprise. I was hoping you could help us understand time frame a little bit for the enterprise opportunity. So you've talked about it being a big opportunity but it's one that might take a while to emerge. Like what's a good time frame for investors to think about when enterprise becomes a really big business for DISH? And I'm just curious the capital intensity of that business versus consumer, are there big upfront cost to help enterprises activate that service? Or is the thought that enterprises will bear those costs?

Stephen Bye
Executive Vice President and Chief Commercial Officer at DISH Network

Yes. On the enterprise, we're actually -- we're -- we have traction now in the enterprise segment. But the revenue is still fairly small. Obviously, that business scales as we grow the business. So we already have some really positive traction right now. That will grow as we go into '22, but I don't anticipate that to become material until we get into 2023. And so we'll continue to grow that business scale out. We can grow that while they're building the network because it's not constrained by geography. And so we can actually -- and we are pursuing opportunities that aren't limited by the geographies and footprint we're deploying. But as we build that footprint out, then it expands the market opportunity for us. So we'll see that sort of begin to pick up as we go through '22, but really not having a material impact until we get into '23. So that's kind of where we see the enterprise.

Charlie Ergen
Co-founder and Chairman at DISH Network

And I don't think we see a lot of capex for that business beyond what we do for our micro network.

Stephen Bye
Executive Vice President and Chief Commercial Officer at DISH Network

And it's very success-driven capex. We don't spend the capex in anticipation. It's really tied to the opportunity each one, one by one.

Doug Mitchelson
Analyst at Credit Suisse Group

Great, Thank you for all your answers.

Operator

Your next question comes from the line of Craig Moffett with MoffettNathanson.

Craig Moffett
Analyst at MoffettNathanson

Yes. Hi, Two questions, if I could. First, when you talk about the enterprise segment, what are the specific applications, if you could just drill down a bit that you're targeting? Is it mobile edge compute? Is it more IoT types of things? Is it something where latency is the real advantage? It would seem like all of those things have somewhat different implications for the network. And then if I could just return to the comments you made about financing, Charlie. Can you just talk about -- as you think about going to the capital markets for financing, how do you prioritize between debt and equity? And if it's debt, would you be willing to secure any new debt against spectrum? Or would you only look at unsecured?

Charlie Ergen
Co-founder and Chairman at DISH Network

I'll take -- Craig, I'll take the last part, the second part and then -- we look at the market -- we don't have a religion and we look at the marketplace in terms of where you can get efficient execution. And obviously that could be secured, unsecured, could be equity, it could be some combination of those kind of things. You've seen we've done virtually everything in the past, over time. So we just look at where the marketplace and what's available and where -- and what makes sense from our capital structure long term. Stephen?

Stephen Bye
Executive Vice President and Chief Commercial Officer at DISH Network

Yes. In terms of the question on Enterprise, Craig, it's really all of the above. There isn't a single application that one could point to and say that, that dictates sort of the enterprise opportunity for us. It really depends on the vertical. And really, I would say that if there's a common theme that runs across each of the verticals. It's really about how do they drive their operating efficiency as a business using the technology to facilitate that. And so depending on what vertical it is depending on what solutions they're trying to deploy, what systems they have in place, it drives different requirements. There are requirements and some opportunities for very low latency, depending on what they're doing in terms of their control systems and there are others that don't have that same criteria. So each one of these -- and I guess my earlier comment about degrees of freedom you have to have the degrees of freedom within the platform and the architecture to support those different solutions based on what that enterprise need is. So there's no silver bullet, and one application isn't going to win the opportunity here. It's the ability to put it all together on a common platform.

Craig Moffett
Analyst at MoffettNathanson

Thank you.

Paul W. Orban
Executive Vice President and Chief Financial Officer at DISH Network

We'll take one more analyst call before we go to media.

Operator

All right. Certainly, sir. Our final analyst question comes from the line of Ben Swinburne with Morgan Stanley.

Ben Swinburne
Analyst at Morgan Stanley

Hi, Good morning. One on wireless and one on the video business, please. Charlie, we've heard from lots of companies this quarter, I'm sure you know there's tons of supply chain stress out there. And I'm just wondering if you think there's an opportunity to work with the FCC to get more time? It would seem like that would be a reasonable request, just given all we're hearing on the equipment front. So that's the first one. And then on the video side, churn has been unbelievably strong at DBS since COVID began. It feels like part of that is sort of nobody is moving and there's just sort of depressed activity. I'm wondering if you guys have a view as to what -- when or if and how that normalizes and what you guys are doing to make sure you keep it below where it was kind of pre-COVID?

W. Erik Carlson
President and Chief Executive Officer at DISH Network

Ben, it's Erik. I'll take that second one first, and then I'll turn it over to Charlie or John on the supply chain item, I think, Charlie. But look, I mean we've been talking on the call for quite some time about a bit of a pivot strategy in DBS. And so we have been focused really kind of on acquisition and retention of profitable customers in rural America. There's no doubt, I think COVID had a unique inflection point where you're seeing a bit less switching. Some of that is obviously impacting our acquisition, and we're managing our spend on acquisition based on the kind of response rates we're seeing. And so it's benefiting obviously subscribers on the retention side. But I'll tell you, our strategy of really over the past several years focusing in on attracting and retaining the right customer is starting to pay dividends, and was starting to pay dividends before COVID. So when that changes, look, there's just a lot of variables, right? You still got COVID, you've got some of our strongest and longest term partners now competing on the D2C side. Obviously, there's a piece of -- a lot of the customers that we reach are in rural America. And as broadband densifies, obviously, customers will have more choice. And so there's just -- there's a lot of variables to try to forecast what's going to happen. But we're so focused in on profitability, providing customers a great customer experience. Our fourth J.D. Power win last quarter was great for the team in order to celebrate and a great testament to the efforts we've put in on the customer experience side. So I'll turn it over to Charlie on supply chain.

Charlie Ergen
Co-founder and Chairman at DISH Network

On supply chain, I mean there's no doubt there are supply chain issues, but there's a lot of issues. COVID, the fact that people had to work at home and a lot of our vendors work at home and just a lot of disruption out there. But we focus on it every day, which is you're always going to have challenges, and we just have to overcome those challenges, and we are a company that has been in the office since May of last -- of 2020. So we're working as a team and managing to those issues. And Dave and his team have managed through the deployment issues, and we're still on track. We're not -- yes, we -- the FCC, in our agreement, you do have supply chain issues as a reason you could be late, but there has to be a real reason. I mean you wouldn't make that up. And so we're just going to get there. That's just the way we're going to do it. On the handset, there's two other areas. Labor is an issue that our teams having to work extraordinarily hard because people are -- there's not enough supply of labor out there today. And the handset issue is probably the biggest because we had headwinds in this January one shutoff for CDMA. So we had to take handsets and give it to existing customers that would have been a new customer. And so absent supply chain issues on the handset side, where we're getting a fraction of what we've ordered, we would have been -- we would have had growth -- we had a lot more growth there. So -- and we don't have the scale that the incumbents have with the vendors. So I don't know that we get our fair share of handsets. And so we worked extraordinarily hard to make sure that we're on the radar -- people's radar screen and our customers aren't -- primarily aren't buying the $1,000 phones. They're more economically challenged. But as we get into postpaid and as we get into owner economics, that changes for us in a very positive way. John, you may want to talk about -- if we can go -- retail is important because it's a really positive story for us. And maybe, John, can you talk about it in a second?

John Swieringa
Executive Vice President and Group President, Retail Wireless and DISH Chief Operating Officer at DISH Network

Yes, of course. Thanks, Charlie. We're definitely building capabilities to return the business to profitable growth. We see it as a situation where we would have grown in the third quarter, if not for some of the supply chain issues as well as some of the headwinds from CDMA that have been covered. We're definitely ramping up our team across retail, national retail and digital, to take the business to growth. We're taking a segmented approach to the different opportunities we see. And access to handsets is a key thing going forward. And as Charlie said, we're definitely focused there. And we would anticipate seeing these situations clean up for us sometime late next year. We we're not quite sure about Q1, Q2 yet, but we're focused on supply and also making sure that the devices that we do have go towards the most profitable activities. And we talked about it earlier with respect to the CDMA, we see there being over one million customers still on the CDMA network if the network were to shut off on March 31. So additional handsets is something that we're definitely focused on. And we'd love to be able to partner with T-Mobile on that as Charlie alluded to earlier. And it's a daily focus here to make sure that we can keep our partners supplied and move the business forward.

Ben Swinburne
Analyst at Morgan Stanley

Got it, Thank you.

W. Erik Carlson
President and Chief Executive Officer at DISH Network

Operator, we're ready for a few calls from the media now.

Operator

[Operator Instructions] We'll take our first question from Scott Moritz with Bloomberg.

Scott Moritz
Analyst at Bloomberg

Great. Thanks. Charlie, the stock's taken a big hit today. I think people hear from all this that the 5G network costs are creeping up, that the commercial launch might be slipping out a little further. Doubters are probably saying I told you so. How would you address these concerns?

Charlie Ergen
Co-founder and Chairman at DISH Network

Well, I don't think there shouldn't be a surprise that the capital expenditures are where they are since we -- that's what it takes to build a network, and we're doing it infinitely less expensive than anybody has ever done it before. So -- and obviously, the -- I think we're doing -- I think we should have been a little faster on rollout in Las Vegas. I mean, I think that's fair. But I think other than that, most everything else we're doing is we're doing probably better than we anticipated on. And we're not -- we're not exactly understood by the industry that much. And part of it is because we don't spend a lot of time going through strategically what we're doing, and we spend a little bit more time on just -- it's a complicated story, and it's a little bit easier for us just to do it and then show people as opposed to try to explain it. And just a simple example is we're about more than just a handset business, yet the people who follow us and stuff are -- and we're basically a cloud IT network that we're building, and it's a little bit different thought process on what that looks like than traditional networks. And so we have to do a better job of explaining our story and we have to execute in our markets between now and June of 2022. So I think that's the stuff we'll focus on. And the marketplace, they don't always get it right in the short term, and don't get it right in the long term. And we're one of the few companies that has the ability to be able to think long term. The market, if we had thought short term, we would -- we'd try to get DBS up five years ago because that's what people wanted us to do. And so I think we know where it's going. We know how -- the power of this network, we know how special this network is going to be, and we know the opportunity. So it's on us to execute and then give people the road map to see why their investment in DISH is a smart investment. And we have certainly work to do there. But we're focused on making sure we get our network up and operating and then we'll talk about it. And there'll be a little bit in AWS. I think there'll be a little bit in Las Vegas and AWS to reinvent stuff. I think people will start to see it there and start to understand a little bit better because those are the people that actually -- the developers and the people in the cloud, they'll have a better feel for it. I mean, last year, this time, people didn't -- say we weren't going to build the network. Now I think it shifted to, okay, we get it to -- I think most people believe we're building the network, now can you make it -- can you stand through your $10 billion long term and can you make it profitable. That we have to show.

W. Erik Carlson
President and Chief Executive Officer at DISH Network

Okay, operator, we'll take one more from the media.

Operator

All right, sir. Next, we'll take our last question from Amy Maclean with Cablefax.

Amy Maclean
Analyst at Cablefax

Hi there, Thank you for taking my questions. I just wanted to check in your comment earlier about TEGNA did not sound very optimistic, and I know you filed a good faith complaint. Are there negotiations going on still between the two of you? This is Charlie I don't think there's serious negotiation going on, really. I mean, I think we remain far apart. We've got eight weeks of football left and then we'll have lost the customers who can't find football somewhere else and it remains such a huge tax that we know where that ends up. So having said that, we remain available to have an honest conversation about where things go. We know what the prices we pay everybody else is. We know the prices in the marketplace. We know the ratings. So we know the economic value. We always pay more than the economic value because we have to factor in the customers that we lose. But the economic value to us is going down, not up right now because we've probably lost -- and it's not tied away by any means in terms of customer that they find another place to watch the news, and they found another place to watch football, so. And they can take money, we give them a credit when they don't have TEGNA. So we give them credit, so they save money. So it's a bit of a balance. But we prefer to be up. We've -- TEGNA has been a good partner. We prefer to have it up, we prefer to have an honest negotiation, but we're just apart. Thanks.

W. Erik Carlson
President and Chief Executive Officer at DISH Network

All right, operator, and everyone, thank you. We'll talk to you next quarter.

Operator

[Operator Closing Remarks]

Corporate Executives
  • Brandon Ehrhart
    Senior Vice President and General Counsel, Wireless; Corporate Secretary
  • Dave Mayo
    Executive Vice President and Network Development
  • Charlie Ergen
    Co-founder and Chairman
  • Stephen Bye
    Executive Vice President and Chief Commercial Officer
  • W. Erik Carlson
    President and Chief Executive Officer
  • Paul W. Orban
    Executive Vice President and Chief Financial Officer
  • John Swieringa
    Executive Vice President and Group President, Retail Wireless and DISH Chief Operating Officer
Analysts

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